Price to Rent Ratio Calculator

What is the Price-to-Rent Ratio?

The Price-to-Rent Ratio helps you evaluate whether it's better to buy or rent a property by comparing the cost of purchasing to the annual cost of renting.

It is a widely used real estate metric that answers the question:

"How many years of rent would equal the cost of buying this property?"

​​​​​​​Price-to-Rent Ratio Formula

$\text{Price-to-Rent Ratio}=\frac{\text{Property Price}}{\text{Annual Rent}}$

How to Calculate Annual Rent

$\text{Annual Rent}=\text{Monthly Rent}\times 12$

Example: Calculate Price-to-Rent Ratio

Suppose:

• Property Price = $300,000
• Monthly Rent = $1,500

Step 1: Calculate Annual Rent

$\text{Annual Rent}=1500\times 12=18,000$

Step 2: Calculate Price-to-Rent Ratio

$\text{Price-to-Rent Ratio}=\frac{300,000}{18,000}=16.67$

Final Answer:

The Price-to-Rent Ratio is 16.67, which falls into the "Depends" zone. You should consider other factors like property taxes, maintenance, and market trends before deciding to buy or rent.

Conclusion

The Price-to-Rent Ratio is a helpful starting point for evaluating housing affordability. While it doesn’t account for all costs or investment growth, it gives a quick look at whether buying or renting makes more sense.